A McKinsey & Co. report projects that $57 trillion in funds will be needed to build and repair public infrastructure assets through 2030 but governments are unlikely to meet the global demand for infrastructure.
McKinsey’s Alastair Green, Tim Koller, and Robert Palter said they believe many public works projects fail to attract private funding due to an assumption that the return on such projects is often lower than the required capital.
“A more thorough evaluation of the economics — especially around assumptions about lower government cost of capital — could move more infrastructure deals forward,” the report authors wrote.
They recommended that public infrastructure owners develop a holistic approach to assess the pros and cons of government and industry financing.
Green, Koller and Palter added that private sector participation can help lower project costs because industry has a track record of meeting construction deadlines and managing potential cost risks.